Speech by Minister Rosenthal at the Higher School of Economics, Moscow

Good afternoon ladies and gentlemen,

It is my great pleasure and honour to address you this afternoon at one of Russia’s top universities. I would like to thank you, Mr Yakobson, for your warm reception and your kind words of introduction. I am equally grateful to Mr Zhelezov, Deputy Vice Rector, and Ms Batalina, Head of the Office for International Development, for assisting in the preparation of today’s event. And I extend a warm welcome to the students and staff of the Faculties of: Public Administration; World Economy & International Relations; and Political Science. And also to the students from St. Petersburg, Nizhniy Novgorod and Perm who are listening in through internet connections. Thank you all for being here.

(Bilateral year 2013)

Earlier today, I had a very useful meeting with your Minister of Foreign Affairs, Sergey Lavrov. And of course, we discussed bilateral affairs. Both Mr Lavrov and I are looking forward to 2013, when Russia and the Netherlands will organize a bilateral year to bring Russian-Dutch relations to the attention of a wider audience. As a result, we hope that many companies and organisations will step up their levels of bilateral cooperation. And universities, too. The Higher School of Economics already works with Erasmus University in my home town, Rotterdam. I am sure that the two universities can come up with a special contribution to this bilateral year. I warmly invite you to do so. This way, we will all get to see what the Russian-Dutch partnership has to offer: in an economic, social and of course cultural sense.

I must say that cultural relations between our two countries have never been better. In recent years, the Netherlands has played host to many successful Russian productions and exhibitions. I should mention the Hermitage in Amsterdam in particular. Since opening in 2009, it has attracted well over a million visitors. Needless to say, our cultural relations and exchanges have an inherent value. But at the same time, cultural cooperation has also enhanced our broader relationship. Cultural diplomacy as part and parcel of economic diplomacy!

(Historic changes in the Arab world)

Ladies and gentlemen,

Mr Lavrov and I also discussed the latest developments in the wider world. We spoke about the Arab region, where the call for change still rings loud and clear. History is unfolding before our eyes. And even though we cannot be sure of the outcome, it is clear that these cries for freedom, democracy, human dignity and a better future reflect a universal desire. One that lives in the heart of all the world’s citizens. No one wants to live under the yoke of a corrupt and ineffective government that oppresses its people and ignores their plight. Ultimately, people’s legitimate demands will prevail. The status quo is now a thing of the past. New generations stand ready to shape their country’s future. Exactly as young Dutch people stand ready to contribute to the Netherlands’ future. And as you stand ready to make your mark on Russia’s future.

(A strong economy fosters stability and freedom)

One thing I am certain of: besides necessary political and social reforms, success will also depend on economic reforms and opportunities. The chance to tap a country’s economic and human resources; to make the best use of its comparative advantages; to innovate; to strengthen the private sector; to create jobs and generate wealth. These areas – prosperity, stability and freedom – are all intertwined. In fact, you can’t have one without the other. If a country lacks economic prospects, stability and freedom may turn out to be short-lived. President Medvedev was right, when he wrote in his article ‘Go Russia!’, that ‘the more intelligent, smart and efficient the economy is, the higher the level of citizens’ welfare. And our political system and society as a whole will also be freer, fairer and more humane.’ And the reverse is equally true. Again, I’m quoting from President Medvedev’s article: ‘An innovative economy […] is part of a culture based on humanistic values. It is grounded in efforts to […] guarantee a better quality of life [and] liberate individuals from poverty, disease, fear and injustice.’ 1 These words have a universal resonance. They apply to the people of Tunisia, Egypt and Libya as much as they do to the people of Russia and the Netherlands.

(Private sector as engine of growth)

The Dutch government is focusing on the economy and on private sector development as the only way to emerge stronger from the global financial and economic crisis. And like Russia, my government has identified several top sectors we want to concentrate on. These sectors reflect our comparative advantages. The comparative advantages of the Netherlands are: (1) location: (2) brains and (3) our commercial DNA. Sectors we are good at include agri-food, horticulture, water, energy, chemical industries, life sciences and creative design. This is where we expect the highest rates of return. These are the sectors we should invest in, to improve our competitiveness globally. This is extremely important to the Netherlands. We rely heavily on exports. In fact, thirty per cent of our GDP comes from exports. So it’s important that we strengthen our economic position in this fast-changing world. A world in which other economies, most notably those in Asia, are growing faster than we are. New markets offer new opportunities, but we have to ensure that we remain cutting edge in the areas we’re good at. Or others will overtake us.

I am a free market thinker, and as such, I am not keen on top-down involvement from government when promoting and supporting private enterprise. We should realize that growth will ultimately come from the private sector. Growth comes from people with an innovative mindset. In general, governments should keep a certain distance from the private sector. Policies and bureaucracies do not generate growth. Entrepreneurs and innovation do. And I’m not referring only to big companies. The greatest engine of growth is often the small or medium-sized enterprise. Businesses that operate in niche markets. Governments should make their lives as easy as possible. Not create hurdles and obstacles to investment. They should reduce bureaucracy and red tape in order to create an enabling environment, an attractive business climate. So that companies can prosper. And society can prosper with them.

(Creating the right conditions: good governance and the rule of law)

Ladies and gentlemen,

For any economy to flourish, good governance and the rule of law are essential. This is about creating efficient and effective governance: the basic condition for any government to be considered legitimate. It’s about establishing a transparent and predictable environment that attracts business and investment. Corruption and lack of transparency hamper efficient, effective and legitimate government and stand in the way of economic incentives and growth. Both citizens and businesses have a right to legal certainty. They must be assured that in cases of wrongdoing they will be heard in court and protected by law. Without discrimination. This is the difference between acting in the public interest and acting in the interest of a corrupt bureaucrat or businessman. The judiciary has to be aware of this distinction: it goes straight to the heart of its independence and professionalism. This is about creating a level playing field, where everyone is held to the same values and standards. Unless these conditions have been established, governments will have no credit with their people. Businesses and citizens will suffer, and the country as a whole will be doing itself a great disservice. But companies and entrepreneurs have a responsibility too! Just as governments should genuinely commit to good governance, they should take their corporate responsibility seriously.

President Medvedev understood this very well when he announced Russia’s modernisation agenda eighteen months ago. A highly ambitious agenda, which inspired the Partnership for Modernisation that was agreed between Russia and the European Union in June last year.

Helping strengthen the rule of law abroad is one of the Netherlands’ foreign policy objectives. Over the years we have developed considerable expertise in this area and we are happy to share it with others, at their request. Let me be very clear about that: we’re not here to wag our finger. We’re here to lend a hand. In that spirit of partnership, the Netherlands has already contributed to some very valuable projects here. Russia’s Civil Code, for example, was modernised with the assistance of the Dutch-based Center for International Legal Cooperation (CILC). This has led to follow-up projects involving CILC and the Asser Institute. I can only say that I welcome further cooperation in this area. It could meet a pressing need. And Dutch companies also stand to gain from these efforts. They, too, benefit from a level playing field, good governance and the rule of law.

(Importance of a rules-based international environment)

Ladies and gentlemen,

What is true at national level is equally true at global level. Countries benefit from a level playing field in which everyone is held to the same rules and standards. In fact, in this complex modern world, the best way states can raise their standard of living and ensure their security is by committing to a credible and effective international order. Such a multilateral system is based on legal principles that apply to all people and all nations. It is designed to impose order and to prevent or resolve conflict and chaos. Of course, it is of crucial importance that multilateral institutions are held to the same standards of good governance that we expect from their member states. They, too, must be transparent, efficient and effective. They must have the capacity to solve real problems. If not, their legitimacy will be at stake. Once these conditions have been established – and we should continue to work on that – it is in everyone’s interest to commit to such a system and its rules. A world in which every state was a responsible stakeholder and worked within international frameworks would be a better place for everyone.

Russian Czar Nicolas II was an early supporter of this way of thinking. In 1898, he invited the leaders of the world’s most important nations to hold an international conference on peace and disarmament. Talking and concluding agreements, he argued, would be better tools for progress and prosperity than division and hostility. After US President Theodore Roosevelt had accepted the invitation, The Hague was chosen, at Russia’s request, as the venue for the first Peace Conference, in 1899. It was followed by a second conference in 1907. By that time, construction had started on the Peace Palace, which today still symbolises the world’s quest for peace and justice. The Peace Palace opened its doors in 1913, almost a hundred years ago. The Hague has since developed into the world’s legal capital – a reputation that fills the Dutch government with pride. And we have never forgotten the Russian roots of that legacy.

The Dutch Constitution makes clear that foreign policy has two objectives. First, to defend and protect our own interests – which I take to mean our prosperity and our security. Secondly, it should promote the development of the international legal order. This is also very much in our interest. Given our small size and our reliance on international trade, a rules-based international environment offers us valuable protection. We do not sacrifice our national interest by cooperating with others. On the contrary, being a dependable partner in the world increases our security and prosperity. Every step that brings us closer to the goal of a global level playing field is good for the Netherlands. That’s why we will be cheering later this year when Russia – hopefully - joins the World Trade Organisation. I very much agree with what Prime Minister Putin said in Brussels: ‘This move will benefit both Russia and the European Union.’ I also strongly support finalising the Doha Round and bringing the liberalisation of world trade a step closer. This would give an estimated 300 billion-euro boost to world trade. That’s an opportunity our economies can ill afford to pass up.

Ladies and gentlemen,

I have argued that modern governance entails freeing up the private sector because it is the engine of growth. Modern governance entails building an enabling environment for businesses and citizens by promoting good governance and the rule of law. And modern governance entails involving stakeholders, not deciding on their behalf. This applies both to national and international stakeholders. A level playing field, which offers predictability and protection, is good for all countries, big and small. This is what modern diplomacy should be aiming for. At least, it is what modern Dutch diplomacy is aiming for.

Thank you.

1 President Dmitry Medvedev, ‘Go Russia!’, 10 September 2009